IV.

Economy

Since early colonial times, mining for precious minerals and metal ores has played an important role in Bolivia's economy. Many of the largest mining operations were nationalized during the 1950s. However, later Bolivian governments encouraged private industrial development and sought foreign investment capital. The state airline, Lloyd Aéreo Boliviano, was sold to private interests in 1993. In 1995 Bolivia began implementing a privatization program in which the government did not sell state-owned companies outright; instead, half of the company's shares and management control were awarded to investors who agreed to invest in the company for several years rather than pay cash to the government. The remaining shares were to be divided among Bolivia's adult population and held in retirement accounts as a new private pension system. Despite these efforts to deflect charges that Bolivia was “selling out” its resources to foreigners, the privatization efforts drew sustained criticism and prompted serious labor strife.

Many farmers in rural areas of Bolivia depend on the production of coca for a living. In South America, the leaves of the coca plant are dried and chewed as a stimulant. Coca leaves also yield the drug cocaine. To halt traffic in cocaine, the United States government has pressured Bolivia to stop farmers from growing coca. The Bolivian government has entered into agreements with the United States to restrict coca production in return for U.S. economic assistance. These agreements either do not adequately compensate coca growers or else ask them to grow crops for which their land is unsuited. Not surprisingly, Bolivia's coca growers object.

Bolivia's estimated gross domestic product (GDP) in 2005 was $9.3 billion. GDP is a measure of the value of all goods and services a country produces. Budget figures for 2005 showed revenues of $2.5 billion and expenditures of $2.2 billion.

A.

Agriculture, Fishing, and Forestry

Bolivia has little land suitable for agriculture, because mountains, forests, and swamps spread over so much of the country. Many of the Bolivians who farm engage in subsistence agriculture on the Altiplano and live at or below the poverty line. Agriculture employed 5 percent of the labor force and, along with fishing and forestry, accounted for 15 percent of the GDP in 2005.

Bolivia's agriculture suffers from antiquated farming methods and inadequate transportation. Although the country is self-sufficient in the production of sugar, rice, and meat, it must still import certain foodstuffs. The chief Bolivian crops are soybeans, sugar cane, potatoes, cassava, bananas, maize, rice, plantains, and citrus fruits. Farming with modern methods is increasing in the eastern plains near the city of Santa Cruz. Fishing is a relatively unimportant industry in landlocked Bolivia.

B.

Mining, Manufacture, and Trade

Mining is a major industry in Bolivia, providing a large share of the country's export earnings. Bolivia's income from mining depends on prices in world markets. Bolivia was one of the world's leading producers of tin through most of the 20th century, but tin is now produced more cheaply in other countries, and Bolivia's tin production has declined as a result. By the end of the 20th century, increased production of other minerals—gold, silver, and zinc, in particular—offset the decline in income from tin. Other mineral resources include lead, antimony, tungsten, iron, and lithium. However, protests including legal battles delayed government plans to open these deposits to private investors.

Petroleum and natural gas production increased in importance in the 1960s and early 1970s; by the early 1990s Bolivia was self-sufficient in petroleum and was exporting significant amounts of natural gas to Argentina. In the late 1990s a pipeline was built to supply natural gas to Brazil.

The refining of petroleum and the processing of food products (including beverages) and cement are Bolivia's major manufacturing industries. Smaller industries include leather working, tobacco processing, and the manufacture of chemicals, textiles, paper, furniture, glass, explosives, and matches. La Paz and Santa Cruz are manufacturing centers as well as centers of domestic trade. In 2005 industry, which includes mining, manufacturing, and construction, accounted for 32 percent of the GDP. Industry employed 28 percent of the workers.

Although Bolivia long depended on mineral exports, declining tin exports and increased production of petroleum and natural gas changed the country's economy during the 1980s. By the year 2000, natural gas accounted for nearly 20 percent of export earnings while metals provided close to 15 percent. Animal feed was another important export. Bolivia's imports consist mainly of machinery, motor vehicles, electric equipment, and manufactured goods. Bolivia consistently has a trade deficit. In 2003 imports totaled $1.7 billion, and exports earned $1.7 billion.

The principal purchasers of Bolivia's exports are Brazil, the United States, Colombia, the United Kingdom, Venezuela, Peru, and Argentina. Chief suppliers of imports are the United States, Brazil, Argentina, Chile, and Peru. Ties with partners in the Andean Community are also important to Bolivia’s trade; these partners include Colombia, Ecuador, Peru, and Venezuela. Founded in 1969, the group works toward common policies on energy, tariff reduction, industrial and agricultural development, political cooperation, improved internal and international trade, and the creation of a common market. Bolivia is also a member of the Latin American Integration Association (LAIA), an organization with many of the same goals as the Andean Group, but on a wider scale. In 1996 Bolivia joined the Southern Cone Common Market (known by its Spanish acronym, MERCOSUR), a trade group dedicated to lowering tariffs and removing other trade barriers among its member nations. MERCOSUR—which also includes Argentina, Brazil, Paraguay, and Uruguay—covered a market of more than 190 million people in 1995, making it the world's fourth-largest free trade group.

C.

Tourism

Tourists come to Bolivia to enjoy the beautiful mountain scenery of the Andes and to visit Lake Titicaca. In addition, there are Incan and pre-Incan ruins in the mountains. Bolivia also has a number of UNESCO World Heritage Sites, including the silver-mining town of Potosí, which dates from the 1500s; the historic city of Sucre, the first capital of Bolivia; and Jesuit missions at Chiquitos, which were built between 1696 and 1760. In 2004, a Che Guevara Trail opened in eastern Bolivia. It leads from Santa Cruz via Inca sites to the village near Vallegrande, where revolutionary leader Che Guevara was captured and shot in 1967.

D.

Currency and Banking

The basic unit of currency is the boliviano, equivalent to 1 million old Bolivian pesos (8.10 bolivianos equal U.S.$1; 2005 average). The Banco Central de Bolivia is the sole bank of issue. Several state-owned development banks provide investment credits to small mining and agricultural operations. Foreign and domestic private financial institutions also operate in the country.

E.

Transportation and Communications

Bolivia has 3,698 km (2,298 mi) of railroad tracks. Railroads connect the landlocked country to ports on both the Atlantic and Pacific oceans. The principal line connects La Paz with the free port of Antofagasta, Chile. Since 1992 Bolivia has had use of Peru’s seaport at Ilo. Bolivia also has free port privileges in the maritime facilities of Argentina, Brazil, and Paraguay.

About 60,762 km (about 37,756 mi) of roads exist in Bolivia; only a few are hard-surfaced, and many are passable only in the dry season. The country’s major road links the highland city of La Paz with Santa Cruz in the eastern lowlands, the country’s most productive agricultural region. A paved road also links the country to the Pacific Ocean at Arica, Chile. The Pan-American Highway links Bolivia with Peru and Argentina. Light-draft water vessels can navigate about 10,000 km (about 6,000 mi) of the nation's rivers, primarily in the eastern part of the country.

Bolivia has 29 daily newspapers. Reporting on political protests can be dangerous and result in jail sentences, and journalists generally exercise self-censorship. Radio is an important means of communication in rural areas.

F.

Labor

Bolivia's labor force was 4.2 million in 2005. Nearly the entire nonfarm labor force is organized, most of it in unions belonging to the Central Obrera Boliviana (COB), the central labor federation. Peasant unions were established after the 1952 revolution.